Tutorial 2 – DFM5214

1. Which of the following does financial services industry consist of?

I. Telecommunication
II. Insurance
III. Fund Management
IV. Trusts

A. I and II
B. III and IV
C. I, II and III
D. II, III and IV

2. Which of the following statements describing securities firms is (are) CORRECT?

I. They are regulated by Bank Negara Malaysia.

II. They act as intermediaries between buyers and sellers of securities.
III. They charge a commission for their services.
IV. They may also provide advice to investors.

A. I only
B. II only
C. I and IV
D. II, III and IV

3. What is the meaning of “financing” in the financial market?

A. Advising an organization to raise charity funds
B. Investing in the securities market
C. Sourcing funds
D. Converting the assets into cash

5. The capital markets consist of the primary market and secondary market. Which of the
following statements is TRUE regarding the differences between the two markets?
A. New issues are distributed to investors in the primary market while existing securities are
traded in the secondary market.
B. Existing securities are traded in the primary market while new issues are distributed to
investors in the secondary market.
C. New issues are traded in the primary market while existing securities are distributed in the
secondary market.
D. Existing securities are distributed to investors in the primary market while new issues are
traded in the secondary market.
6. Which of the following statements describe the main functions of Bank Negara Malaysia?

I. To issue currency and keep reserves to safeguard the value of the currency.
II. To promote monetary stability and a sound financial structure.
III. Assisting the Prime Minister to promote his policies.
IV. To act as a banker and financial adviser to the Government.

A. I and III
B. II and IV
C. I, II and IV
D. II, III and IV

6. The short term financial instruments traded in money market is commonly called
A. Bonds
B. Shares
C. Notes
D. Commercial Papers

7. Financial intermediation is the process that the financial intermediaries connect

________________ and _____________ by transferring funds from one side to another.
A. Banks and account holders
B. Borrowers and lenders
C. Borrowers and securities firms
D. Investors and lenders

8. Which of the following are the regulators of securities market and banking industry in
Malaysia?
A. Bank Negara and Malaysia Association of Banks
B. Securities Commission and Malaysia Association of Banks
C. Bursa Malaysia and Bank Negara
D. Securities Commission and Bank Negara

9. Which of the following statements is a CORRECT description of “hard currency” in the

foreign exchange market?
A. The values of the currencies often fluctuate often due to political
uncertainty.
B. The values of the currencies often fluctuate due to economic uncertainty
C. The currencies have higher appreciation rates than the soft currency.
D. The currenies are widely accepted around the world as a form of payment for goods and
services.

10. If the inflation rate is 5%, what will be the selling price after 3 years of a goods that you
can buy right now for $1,500?
A. $1,628
B. $1,704
C. $1,736
D. $1,827

11. Which of the following indexes is generally used as the measure to reflect changes in the
price level of consumer goods and services purchased by households?
A. Bursa Stock Index
B. Consumer Price Index
C. Producer Price Index
D. Consumer Confidence Index

12. Which of the following instruments would be commonly used as proxies of risk-free assets?
I. U.S. Treasury Bills
II. Malaysia Stocks
III. Malaysian Government Securities
IV. Corporate Bonds
A. I and III
B. II and IV
C. I, II and IV
D. II, III and IV

13. According to their own risk levels, rank the following investment funds in ascending order
(from lowest to highest risk).
I. Regional stock fund
II. Bond fund
III. Hedge fund
IV. Global stock fund

A. (I) (IV) (II) (III)

B. (I) (II) (III) (IV)
C. (II) (III) (IV) (I)
D. (II) (IV) (I) (III)

14. According to regulatory requirements of Bank Negara, all authorized financial institutes
have to meet the minimum levels of two financial ratios. What are these two ratios?
A. Current ratio and liquidity ratio
B. Capital adequacy ratio and debt ratio
C. Debt ratio and current ratio
D. Liquidity ratio and capital adequacy ratio

15. Which of the following institutions is responsible for supervising the insurers operated in
Malaysia?
A. Bank Negara
B. Insurance Industry Union
C. Insurance Claim Department
D. Malaysia Federation of Insurers
16. Which of the following constitutes stock market manipulation?
A. Actively interfere the demand and supply of the securities and derivatives
B. Company director disclose the sensitive company news which have not been publicly
disclosed
C. Anyone who disclose unfavorable information intentionally regarding the company business
D. An account executive trades stocks or uses funds in an account without the clients' consent
or knowledge

17. Corporate financing comes ultimately from:

A. savings by households and foreign investors.
B. cash generated from the firm's operations.
C. the financial markets and intermediaries.
D. the issue of shares in the firm.

18. A company can pay for its expansion in all the following ways except:
A. by using the earnings generated from its sale of obsolete equipment.
B. by persuading a director's mother to make a personal loan to the company.
C. by purchasing bonds in the secondary market.
D. by selling stock certificates for a new subsidiary.

19. "Reinvestment" means:

A. new investment in new operations.
B. additional investment in existing operations.
C. new investment by new shareholders.
D. additional investment by existing shareholders.

20. Financing for public corporations flows through:

A. the financial markets only.
B. financial intermediaries only.
C. derivatives markets.
D. the financial markets, financial intermediaries, or both.

21. When corporations need to raise funds through stock issues, they rely on the:
A. primary market.
B. secondary market.
C. tertiary market.
D. centralized Bursa exchange.

22. Which of the following are both a financial intermediary and a financial institution?
A. Mutual funds
B. Pension funds
C. Insurance companies
D. Hedge funds

23. Which of the following financial assets is least likely to have an active secondary market?
A. Common stock of a large public firm
B. Bank loans made to smaller firms
C. Bonds of a major, multinational corporation
D. Debt issued by the Malaysian Government
24. When Patricia sells her General Motors common stock at the same time that Brian
purchases the same amount of GM stock, GM receives:
A. the dollar value of the transaction.
B. the dollar amount of the transaction, less brokerage fees.
C. only the par value of the common stock.
D. nothing.

25. Which one of these is a money market security?

A. Commercial paper
B. Common stock
C. 2-year bond
D. 20-year bond

26. A bond differs from a share of stock in that a bond:

A. represents a claim on the firm.
B. has more risk.
C. has guaranteed returns.
D. has a maturity date.

27. Short-term financing decisions commonly occur in the:

A. primary markets.
B. secondary markets.
C. capital markets.
D. money markets.

28. You can buy silver in the:

A. capital markets.
B. foreign exchange markets.
C. commodities markets.
D. option markets.

29. Commodity and derivative markets:

A. are additional sources of financing for corporate projects.
B. enable the financial manager to adjust a firm's exposure to various business risks.
C. are always over-the-counter markets.
D. deal only in foreign currencies.

30. Foreign currencies are traded:

A. only by banks in KL and Labuan.
B. over the counter.
C. on both the Bursa and MESDAQ market.
D. on the Intercontinental Exchange.